On one level it makes sense: Facebook is a huge, incredibly fast-growing and
important business, and Google shouldn't want to be left behind
in social networking.

But on another level it's also a bit puzzling: why should Google
care that much about social networking? It's nice, of course, but
why should it be so vital to a search company to be into
"social"? They're not exactly losing money. Isn't "social" a big,
vague buzzword anyway?

There are peripheral reasons: Facebook is inventing new forms of
advertising and looks set to grab a huge share of display
advertising, which Google badly needs to grow beyond its maturing
search business; Facebook has deep and valuable data on users'
likes and preferences, and Google wants comparable data. Facebook
also competes very successfully with Google for top engineering
talent, and Google needs to be seen as the most bleeding-edge
company in the world to attract the best engineers. All of that
is correct.

But none of that explains why Google should be treating Facebook
as a mortal threat, which it increasingly is.

The big reason is in some ways so obvious that no one spells it
out, so here it goes: on the internet, traffic is power
and money and the company that controls the traffic gets the
power and the money.

This is why "social" is more than just a buzzword (though it
clearly is), and why it is actually hugely important.
Social networks drive an ever increasing share of traffic
on the internet, and that traffic is power and money.

In a narrow sense, people will always be searching for stuff on
the internet, and that stuff will always include stuff to buy
that companies will want to advertise against, and so there will
always be tons of money to be made by being the biggest search
engine.

But there's money to be made building mainframes and selling IT
consulting services, but no one thinks of IBM as the most powerful technology company on
the planet, even though it was for decades, and even though it's
still huge.

Think about it from the perspective of a website owner, whether
it's a blog or it's Amazon. For most of the past decade, the
biggest source of traffic by far was search engine. So the thing
that mattered the most to you if you wanted to make your site
successful was search, whether it was search optimization or
search marketing. The entire "ecology" of the web became turned
around search. Entire businesses were conceived and built around
this assumption.

Now social networks can be 30 to 50% of referrals to media sites.
The fastest growing source of traffic to commerce sites, which is
where the money is, is social, and the history of the internet
teaches us that if something is small but growing very fast, it
will probably be huge. Most startups today, recognizing that they
have limited resources and that SEO has made Google a victim of
its own success, by overcrowding search results, are basing their
distribution strategy around Facebook and Twitter, not Google.

When people talk about the threat to Google from social, they
talk about people changing the way they search for information,
asking their friends before going to Google. That's overhyped.
People will almost always be using computers to search for
information, because it's almost always efficient.

The threat to Google from social isn't that social could replace
search as search, it's that it looks increasingly inevitable that
social will become an equal if not bigger source of traffic, and
therefore power and money, than search.

That might or might not pose a mortal threat to Google's core
search business. But it certainly poses a mortal threat to
Google's understanding of itself as not only the most powerful
and profitable internet company, but as the most central internet
company, the one that everyone gravitates around.